www.EXFILE.com 888.775-4789   ZAP - FORM 8K


    EXHIBIT
10.1

     

    EXECUTION
VERSION

     

     

    PROMISSORY
NOTE

     

    Initial
Principal Sum: $1,760,000

    Maximum
Principal Sum: $10,000,000 

    July 30,
2008

     

    FOR VALUE
RECEIVED, Zap, a California corporation (“Maker”), promises
to pay to the order of Al Yousuf LLC (together with any subsequent holder of
this Promissory Note (this “Note”), and their respective successors and assigns,
“Holder”) at
such address as Holder may from time to time designate in writing, the principal
sum outstanding from time to time hereunder as provided below in paragraph 2
(the “Debt”)
together with interest thereon and all other sums due and payable under any Loan
Document; such principal and other sums to be calculated and payable as provided
in this Note. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in Exhibit A, attached hereto.

     

    Maker
agrees to pay the principal sum of this Note together with interest thereon
and/or all other sums due and payable under any Loan Document in accordance with
the following terms and conditions:

     

    1.  Interest
Rate. Interest shall accrue
daily on the Debt at a rate per annum equal to the greater of (i) One-Month
LIBOR plus 3% per annum and (ii) eight percent (8.00%) per annum (the “Interest Rate”),
commencing on the date of this Note; provided, however, that upon
the occurrence of an Event of Default the Interest Rate shall increase as
described in paragraph 4 hereof. Interest shall be computed on the actual number
of days elapsed based on a 360 day year.

     

    2.  Principal. The initial outstanding
principal sum of the Debt shall be equal to one million, seven hundred sixty
thousand dollars ($1,760,000), which amount shall be released from escrow and
delivered to Maker in accordance with the escrow instructions delivered by the
Holder to the escrow agent, Fidelity National Title Company . Maker may request
additional advances of the principal sum of the Debt evidenced by this Note
(each, an “Advance”) from time
to time by submitting to Holder a written request signed by a duly authorized
representative of the Maker (each, a “Request for
Advance”). Advances shall be for the purposes of (x) the purchase of
inventory from June 1, 2008 consistent with the currently applicable budget
approved by the board of directors of Maker (“Maker’s Budget”)
(such Advances, “Inventory Advances”) or (y)
general working capital to be used consistent with Maker’s Budget (such
Advances, “Working
Capital Advances”). Each Request for Advance shall include a written
statement certified by a duly authorized representative of the Maker (each, a
“Certificate”)
describing in reasonable detail how the Advance will be used either for
purchases of inventory or as general working capital, in either case consistent
with Maker’s Budget. Holder shall be obligated to make an Advance within twelve
(12) calendar days of the receipt of a Request for

    
 

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Advance
and corresponding Certificate if (i) the amount of the requested Advance is not
less than fifty thousand dollars ($50,000), (ii) the total of all such Advances
(including the amount of the proposed Advance) and the initial outstanding
principal sum does not exceed ten million dollars ($10,000,000), (iii) no Event
of Default has occurred, (iv) no material adverse change occurs in the Maker’s
assets, liabilities, financial position or business, (v) the date of the request
is on or before July 30, 2009, and (vi) Maker shall have provided to Holder any
additional deliverables reasonably required by Holder.

     

    3. Payments. Maker shall make the
following payments to Holder:

     

    (a) On August
30, 2008 and on the same calendar day of each calendar month (or, in the case of
the month of February, on the last day of the month) (each, a “Payment Date”)
through and including the Payment Date occurring in February 2010, Maker shall
pay to Holder a monthly payment of interest only equal to the sum of, for each
day in the Interest Accrual Period ending on the calendar day preceding such
Payment Date, the product of (x) the aggregate outstanding principal sum of the
Debt on such day, (y) the Interest Rate on such day and (z) 1/3 60.

     

    (b) Subject
to paragraph (d) below, with respect to each Inventory Advance made hereunder,
the Maker shall make a payment to Holder of the outstanding principal sum of
such Advance on the date which occurs four (4) months from the making of such
Advance; provided, that the date of such payment may be extended at the request
of the Maker if the Holder provides its prior written consent thereto, which
consent shall be delivered or withheld in the Holder’s sole
discretion.

     

    (c) Subject
to paragraph (d) below, with respect to each Working Capital Advance made
hereunder, on the date which occurs six (6) months after the making of such
Advance, the Maker shall make a payment to Holder of the outstanding principal
sum of such Advance.

     

    (d) On the
Maturity Date, Maker shall pay to Holder a payment in an amount equal to the sum
of (i) interest accrued on the Debt during the Interest Accrual Period ending on
the calendar day preceding the Maturity Date (as determined above in paragraph
(a)) and (ii) the aggregate outstanding principal sum of the Debt.

     

    (e) The Debt
shall be prepayable in whole or in part by the Maker at its option without
penalty upon its providing 30 days written notice to Holder of its election to
do so.

     

    4. Gross-up. In addition, Maker
agrees to the following:

     

    (a)
Subject to clause (b) below, all payments by the Maker to the Holder hereunder
shall be made in U.S. Dollars and without set-off or counterclaim, fully grossed
up for the amount of any taxes, levies or imposts imposed by any U.S.
Governmental Authority to the extent not explicitly



    


    
      
        
        

      

      
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    excluded
herein. The Maker’s obligations hereunder shall not be satisfied by any tender
or recovery of another currency except to the extent such tender or recovery
results in receipt of the full amount of U.S. Dollars.

     

    (b)
Except to the extent required by applicable law, any and all payments and
deposits required to be made hereunder, under any other Loan Document or under
any instrument delivered hereunder or thereunder to the Holder or otherwise
hereunder or thereunder by the Maker shall be made free and clear of, and
without deduction for, any and all present or future Taxes or any other taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (other than any such Excluded Taxes). If the Maker shall be
required by law to make any such deduction, (i) the Maker shall make an
additional payment to the Holder, in an amount sufficient such that, after
making all required deductions (including deductions applicable to additional
sums payable under this Section 4(b)), the Holder receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the Maker
shall make such deductions and (iii) the Maker shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.

     

    5.  Costs and
Expenses. The Maker shall promptly
pay all expenses in connection with the making and closing of the Loan
Documents, including, without limitation, all charges for all report fees
(including property condition, structural, engineering and termite), title
examination, title insurance and survey, appraisal, recording and filing fees,
inspection fees, mortgage and documentary stamp taxes and mortgage recording
taxes and fees, if any, note intangible taxes, if any, costs of tax lien
searches, brokerage fees and commissions, the reasonable fees and costs charged
by Holder’s counsel (including Holder’s local counsel, if any), all of Holder’s
out-of-pocket expenses in connection with the Loan Documents and the Debt, and
to pay interest (accrued at the Interest Rate) on any escrowed funds held
overnight. The Maker covenants to pay all amounts required to be paid by the
Maker under this Section 5 within ten (10) days after written demand by the
Holder.

     

    6.  Event of
Default; Default Interest; Late Charge. Upon the occurrence of
an Event of Default, (a) the Debt shall become due and payable, and (b) the
Interest Rate shall increase by three percent (3.00%) per annum. Maker will also
pay to Holder, after an Event of Default occurs, in addition to the amount due,
all reasonable costs of collecting, securing, or attempting to collect or secure
this Note or any other Loan Document, including, without limitation, court costs
and reasonable attorneys’ fees (including reasonable attorneys’ fees on any
appeal by either Maker or Holder and in any bankruptcy
proceedings).

     

    7.  Representations
and Warranties. Maker represents and
warrants to Holder as of the Closing Date and as of each date on which an
additional Advance is made hereunder as follows:

     

    
      	
              (a) 
      

            	
              Organization. Maker (a) is a
      duly organized and validly existing corporation in good standing under the
      laws of the State of California, (b) is duly qualified to
    do

            


    



    


     

    
      
        
        

      

      
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    business
in each jurisdiction in which the nature of its business or the Mortgaged
Property makes such qualification necessary, (c) has the requisite power and
authority to carry on its business as now being conducted, and (d) has the
requisite power to execute and deliver, and perform its obligations under, the
Loan Documents.

     

    
      	
              (b)  

            	
              Authorization. The execution and
      delivery by Maker of the Loan Documents, Maker’s performance of its
      obligations thereunder and the creation of the liens provided for in the
      Loan Documents (a) have been duly authorized by all requisite action on
      the part of Maker, (b) will not violate any provision of any applicable
      legal requirements, and (c) will not be in conflict with, result in a
      breach of, or constitute (with due notice or lapse of time or both) a
      default under, or result in the creation or imposition of any lien of any
      nature whatsoever upon any of the property or assets of Maker pursuant to,
      any indenture or agreement or instrument. Except for those obtained or
      filed on or prior to the Closing Date, Maker is not required to obtain any
      consent, approval or authorization from, or to file any declaration or
      statement with, any governmental authority in connection with or as a
      condition to the execution, delivery or performance of the Loan Documents.
      The Loan Documents to which Maker is a party have been duly executed and
      delivered by the Maker.

            


    

     

    
      	
              (c)  

            	
              Enforceability. The Loan Documents
      executed by Maker are the legal, valid and binding obligations of Maker,
      enforceable against Maker in accordance with their terms, subject only to
      bankruptcy, insolvency and other limitations on creditors’ rights
      generally and to equitable principles. Such Loan Documents are, as of the
      Closing Date, not subject to any right of rescission, set-off,
      counterclaim or defense by Maker, including the defense of
      usury.

            


    

     

    
      	
              (d)  

            	
              Litigation. There are no
      actions, suits or proceedings at law or in equity by or before any
      governmental authority or other agency now pending and served or, to
      Maker’s knowledge, threatened, involving or concerning Maker or the
      Mortgaged Property.

            


    

     

    
      	
              (e)  

            	
              Full
      and Accurate Disclosure. No statement of
      fact made by or on behalf of Maker in the Loan Documents or in any other
      document or certificate delivered to Holder by Maker contains any untrue
      statement of a material fact or omits to state any material fact necessary
      to make statements contained herein or therein not misleading. There is no
      fact presently known to Maker which has not been disclosed to Holder which
      materially adversely affects, nor as far as Maker can foresee, might
      materially adversely affect the business, operations or condition
      (financial or otherwise) of Maker. Maker has not incurred any obligation
      or liability, contingent or otherwise, not reflected in such financial
      data which might materially adversely affect its business operations or
      the Mortgaged Property.

            


    

     

    
      	
              (f)  

            	
              Compliance. To Maker’s
      knowledge, Maker, the Mortgaged Property and Maker’s use thereof and
      operations thereat comply in all material respects with all applicable
      legal requirements. Maker has obtained (in its own name) all permits
      necessary to

            


    



    


     

    
      
        
        

      

      
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    use and
operate the Mortgaged Property, and all such permits are in full force and
effect.

     

    
      	
              (g)  

            	
              Not
      Foreign Person. Maker is not a
      “foreign person” within the meaning of § 1445(f)(3) of the
      Code.

            


    

     

    
      	
              (h)  

            	
              Investment Company Act; Public
      Utility Holding Company Act.  Maker is
      not (i) an “investment company” or a company “controlled” by an
      “investment company,” within the meaning of the Investment Company Act of
      1940, as amended, (ii) a “holding company” or a “subsidiary company” of a
      “holding company” or an “affiliate” of either a “holding company” or a
      “subsidiary company” within the meaning of the Public Utility Holding
      Company Act of 1935, as amended, or (iii) subject to any other federal or
      state law or regulation which purports to restrict or regulate its ability
      to borrow money.

            


    

     

    
      	
               
      (i)  

            	
              Title
      to the Mortgaged Property; Liens. Maker owns good,
      indefeasible, marketable and insurable title to the Mortgaged Property,
      free and clear of all liens, other than the liens contemplated by the Loan
      Documents. The Deed of Trust creates a valid and enforceable first lien on
      the Mortgaged Property. and a valid and enforceable first priority
      security interest in the personal property constituting part of the
      Mortgaged Property, subject to no Liens other than the Permitted
      Encumbrances.

            


    

     

    
      	
              (j)  

            	
              Condemnation. No taking has been
      commenced or, to Maker’s knowledge, is contemplated with respect to all or
      any portion of the Mortgaged Property or for the relocation of roadways
      providing access to the Mortgaged
Property.

            


    

     

    
      	
              (k)  

            	
              Utilities
      and Public Access. The Mortgaged
      Property has adequate rights of access to public ways and is served by all
      utilities required for the current use
thereof.

            


    

     

    
      	
              (l)  

            	
              Physical
      Condition. The Mortgaged
      Property is free of material structural defects and all building systems
      contained therein are in good working order in all material respects
      subject to ordinary wear and tear.

            


    

     

    
      	
              (m)  

            	
              Title
      Insurance. The Mortgaged
      Property is covered by an American Land Title Association mortgagee’s
      title insurance policy insuring a valid first lien on the Mortgaged
      Property, which (a) is in full force and effect, (b) is freely assignable
      to and will inure to the benefit of Holder, (c) has been paid in full, (d)
      is issued by a title company licensed in the State where the Mortgaged
      Property is located, (e) has had no claims made against it, (f) contains
      no exclusions for (i) access or (ii) survey, and (g) lists only the
      security interests related to this transaction as
    exceptions.

            


    

     

    8.    Covenants.

     

    Maker
covenants and agrees that, from the Closing Date and until payment in full of
the Debt:

     

    
      
        
        

      

      
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              (a)  

            	
              Compliance
      with Legal Requirements; Impositions and Other Claims; Contests. Maker shall do or
      cause to be done all things necessary to preserve, renew and keep in full
      force and effect its existence, rights, licenses, permits and franchises
      necessary for the conduct of its business and comply in all respects with
      all applicable legal requirements, contracts, permits, and private
      covenants, conditions and restrictions that at any time apply to Maker or
      the Mortgaged Property. Maker shall notify Holder promptly of any written
      notice or order that Maker receives from any governmental authority
      relating to Maker’s failure to comply with such applicable legal
      requirements.

            


    

     

    
      	
              (b)  

            	
              Maintenance;
      Waste; Alterations. Maker shall at all
      times keep the Mortgaged Property in good repair, working order and
      condition, except for reasonable wear and use. Maker shall not permit
      improvements, equipment or inventory to be removed or demolished or
      otherwise altered (provided,
      however,
      that Maker may remove, demolish or alter worn out or obsolete
      improvements, equipment and inventory that are promptly replaced with
      improvements, equipment or inventory, as applicable, of equivalent value
      and functionality). Maker shall not perform any material alteration unless
      approved in writing by Holder in Holder’s reasonable discretion. Maker
      shall reimburse Holder for all actual costs and expenses incurred by
      Holder, including the fees charged by any professional engaged by Holder
      in connection with any such material
alteration.

            


    

     

    
      	
              (c)  

            	
              Access
      to Mortgaged Property and Records. Maker shall permit
      agents, representatives and employees of Holder (at Holder’s cost and
      expense if no Event of Default has occurred), to inspect (a) the Mortgaged
      Property or any part thereof, and (b) such books, records and accounts of
      Maker and to make such copies or extracts thereof as Holder shall desire,
      in each case at such reasonable times as may be requested by Holder upon
      reasonable advance notice, subject to the rights of tenants under
      leases.

            


    

     

    
      	
              (d)  

            	
              Financial
      and Other Reporting. Maker shall keep
      and maintain or shall cause to be kept and maintained, on a fiscal year
      basis, in accordance with generally accepted accounting principles
      consistently applied, books, records and accounts. Maker shall furnish to
      Holder: (i) annually within ninety (90) days following the end of each
      fiscal year, a copy of Maker’s audited financial statements for such
      period and (ii) on a weekly basis within seven (7) days of the end of each
      calendar week, a reasonably detailed statement of cash flows, together
      with such reasonable supporting documentation and such other information
      or reports as shall be requested by
Holder.

            


    

     

    All
financial statements and other documents to be delivered pursuant to this
Agreement shall (A) be in form and substance acceptable to Holder in its
reasonable discretion, (B) be prepared in accordance with generally accepted
accounting principles consistently applied, and (C) be certified by Maker as
being true, correct, complete and accurate in all material respects and fairly
reflecting the results of operations and financial condition of Maker for the
relevant period, as applicable.


     

    
      
        
        

      

      
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              (e)  

            	
              Place
      of Business; State of Organization. Maker shall not
      change its (a) principal place of business or place where its books and
      records are kept, or (b) the jurisdiction in which it is organized, in
      each case without giving Holder at least thirty (30) days’ prior written
      notice thereof and promptly providing Holder such information as Holder
      may reasonably request in connection
therewith.

            


    

     

    
      	
              (f)  

            	
              Zoning;
      Joint Assessment. Maker shall not
      materially change the Mortgaged Property’s use or initiate, join in or
      consent to any (a) change in any private restrictive covenant, zoning
      ordinance or other public or private restrictions limiting or defining the
      Mortgaged Property’s uses or any part thereof, except those necessary in
      connection with the uses permitted pursuant to this Agreement, or (b)
      joint assessment of the Mortgaged Property with any other real or personal
      property.

            


    

     

    9.   Events of
Default.

     

    The
occurrence of one or more of the following events shall be an “Event of Default”
hereunder:

     

    (a) if Maker
fails to (i) make any scheduled payment of principal, interest, or any amounts
due under this Note on any Payment Date (including all amounts due on the
Maturity Date) and, in the case of any payment to be made on a Payment Date
other than the Maturity Date, such failure continues for three (3) Business Days
after such Payment Date, or (ii) pay any other amount payable pursuant to the
Loan Documents within five (5) days after written notice from
Holder;

     

    (b) if Maker
fails to pay the outstanding Debt on the Maturity Date;

     

    (c) if any
representation or warranty made herein or in any other Loan Document, or in any
report, certificate, financial statement or other Instrument, agreement or
document furnished by Maker in connection with this Note or any other Loan
Document shall be false in any material respect as of the date such
representation or warranty was made or remade and, in the case of any such
representation or warranty which may be corrected, has not been corrected within
thirty (30) days after written notice from Holder;

     

    (d) the
consent by any the Maker to the appointment of a conservator or receiver or
liquidator or similar official in any bankruptcy, insolvency, readjustment of
debt, marshaling of assets and liabilities, or similar proceedings of or
relating to the Maker or relating to all or substantially all of its property;
or the failure by Maker generally to pay its debts as they become due, files a
petition to take advantage of any applicable bankruptcy, insolvency
or

    
 

     

    
      
        
        

      

      
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    reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspends payment of its obligations;

     

    (e) the
failure of Maker to obtain dismissal or a stay within 60 days of the
commencement of or the filing by Maker of an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against Maker
in any proceeding against Maker seeking (i) reorganization, liquidation,
dissolution or similar relief under any statute, law or regulation or (ii) the
appointment of a trustee, liquidator, receiver or similar official of Maker or
of all or any substantial part of Maker’s assets;

     

    (f) the
failure of Maker to maintain the insurance required pursuant to the Loan
Documents; or

     

    (g) a default
shall be continuing under any of the other obligations, agreements,
undertakings, terms, covenants, provisions or conditions of this Note, or under
any other Loan Document, for ten (10) days after notice to Maker, in the case of
any default which can be cured by the payment of a sum of money or for thirty
(30) days after written notice, in the case of any other default (unless
otherwise provided herein or in such other Loan Document).

     

    10.     Method
and Place of Payments; Application of Payments; Maker Obligations Absolute.

     

    (a) Except as
otherwise specifically provided herein, all payments under this Note and the
other Loan Documents shall be made to Holder not later than 12:00 noon, New York
City time, on the date when due, and shall be made in lawful currency of the
United States of America in immediately available funds to an address specified
to Maker by Holder in writing, and any funds received by Holder after such time,
for all purposes hereof, shall be deemed to have been paid on the next
succeeding Business Day.

     

    (b) All
proceeds of payment, including any payment or recovery on the Mortgaged
Property, shall be applied to the Debt in such order and in such manner as
Holder shall elect in Holder’s discretion.

     

    (c) Except as
specifically set forth in any Loan Document, all sums payable by Maker under any
Loan Document shall be paid without notice, demand, counterclaim (other than
mandatory counterclaims), setoff, deduction

    
 

    
 

    
      
        
        

      

      
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    or
defense and without abatement, suspension, deferment, diminution or
reduction.

     

    11.  Security. The obligations of Maker
under this Note are secured by, among other things, the Deed of Trust granted in
favor of Holder by Maker and encumbering or affecting the Mortgaged
Property.

     

    12.  Waivers. With respect to the
amounts due pursuant to this Note or any other Loan Document, Maker waives the
following: (a) all rights of exemption of property from levy or sale under
execution or other process for the collection of debts under the Constitution or
laws of the United States or any State thereof; (b) demand, presentment,
protest, notice of dishonor, notice of nonpayment, notice of protest, notice of
intent to accelerate, notice of acceleration, suit against any party, diligence
in collection of this Note and in the handling of securities at any time
existing in connection herewith, and all other requirements necessary to enforce
this Note except for notices required by governmental authorities; and (c) any
further receipt by Holder or acknowledgment by Holder of any collateral now or
hereafter deposited as security for the Loan.

     

    13.  Usury
Savings Clause. This Note and the other
Loan Documents are subject to the express condition that at no time shall Maker
be obligated or required to pay interest on the Debt at a rate which could
subject Holder to either civil or criminal liability as a result of being in
excess of the maximum rate of interest designated by applicable laws relating to
payment of interest and usury (the “Maximum Amount”).
If, by the terms of this Note or the other Loan Documents, Maker is at any time
required or obligated to pay interest on the Debt at a rate in excess of the
Maximum Amount, the Interest Rate shall be deemed to be immediately reduced to
the Maximum Amount and all previous payments in excess of the Maximum Amount
shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder. All sums paid or agreed to be paid to
Holder for the use, forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the Maximum Amount from time to time in effect and applicable to the Loan
for so long as the Loan is outstanding.

     

    14.  Modifications;
Remedies Cumulative; Setoffs. Holder shall not by any
act, delay, omission or otherwise be deemed to have modified, amended, waived,
extended, discharged or terminated any of its rights or remedies, and no
modification, amendment, waiver, extension, discharge or termination of any kind
shall be valid unless in writing and signed by Holder and Maker. All rights and
remedies of Holder under the terms of this Note and applicable statutes or rules
of law shall be cumulative, and may be exercised successively or concurrently.
Maker agrees that there are no defenses, equities or setoffs with respect to the
obligations set forth herein as of the date hereof, and to the extent any such
defenses, equities, or setoffs may exist, the same are hereby expressly
released, forgiven, waived and forever discharged.

     

    15. Delay Not
a Waiver. Neither any failure nor
any delay on the part of Holder in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising

    
 

    
 

    
      
        
        

      

      
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    any
right, power, remedy or privilege under any Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under any Loan Document, Holder shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under any Loan Document, or to declare a default for failure to
effect prompt payment of any such other amount.

     

    16.  Severability. If any provision of this
Note shall be held invalid by a court of competent jurisdiction, such
invalidation shall not effect the enforceability of the remaining provisions of
this Note.

     

    17. Release. Holder may, at its
option, release any Mortgaged Property given to secure the Debt, and no such
release shall impair the obligations of Maker to Holder.

     

    18.  Governing
Law. This
Note and each of the other Loan Documents shall be interpreted and enforced
according to the laws of the state where the Mortgaged Property is located
(without giving effect to rules regarding conflict of laws).

     

    19.  Venue. Maker hereby consents
and submits to the exclusive jurisdiction and venue of any state or federal
court sitting in the county and state where the Mortgaged Property is located
with respect to any legal action or proceeding arising with respect to the Loan
Documents and waives all objections which it may have to such jurisdiction and
venue. Nothing herein shall, however, preclude or prevent Holder from bringing
actions against Maker in any other jurisdiction as may be necessary to enforce
or realize upon the security for the Loan provided in any of the Loan
Documents.

     

    20. Waiver of
Jury Trial. MAKER AND HOLDER TO THE
FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, WAIVE TRIAL BY JURY IN ANY ACTION
OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY
PARTY HERETO WITH RESPECT TO THIS NOTE OR THE OTHER LOAN DOCUMENTS. EACH OF
MAKER AND HOLDER AGREES THAT THE OTHER MAY FILE A COPY OF THIS WAIVER WITH ANY
COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF
THE OTHER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE
FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER
BETWEEN MAKER AND HOLDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

     

    21.  Sales and
Assignments. Holder may assign, sell,
securitize, participate, pledge and/or otherwise transfer all or any portion of
Holder’s right, title and interest in, to and under this Note and/or the other
Loan Documents in one or more transactions.

     

    22. Due on
Sale; Due on Encumbrance. Maker understands that
in making the Loan, Holder is relying to a material extent upon the business
expertise and/or net worth of



    


     

    
      
        
        

      

      
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    Maker
and, its partners, members, officers or principals and upon the continuing
interest which Maker or its partners, members, officers or principals will have
in the Mortgaged Property and in Maker, respectively. Therefore, Maker agrees
that it will not allow any conveyance, transfer, sale, lease, assignment or
lien, whether by operation of law or otherwise, of, on or affecting all or any
portion of the Mortgaged Property, to occur. Maker further agrees that a
violation of the previous sentence may significantly and materially alter or
reduce Holder’s security for this Note. Accordingly, in the event that a
violation of the second proceeding sentence occurs, then the same shall be
deemed to increase the risk of Holder and Holder may then, or at any time
thereafter, declare the entire Debt immediately due and payable.

     

     

     

     

    [Signatures
Commence on the Following Page]



     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, Maker has caused this Note to be properly executed as of the
date first above written and has authorized this Note to be dated as of the day
and year first above written.

     

     
MAKER:

     

     
ZAP, a California corporation

     

    By:  /s/ Steven
Schneider                       

     

    Name: Steven
Schneider                         

     

    Title:  CEO                                                 


    
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


     

    Acknowledged
and, solely with respect to its obligations set forth in paragraph 2 of this
Note, agreed:

     

     

    
    

     

    
      	 	

              

                HOLDER:

                 

                AL
      YOUSUF, LLC

              

               

               

              By:
      /s/ Eqbal Al
      Yousuf                          

               

              Name:
      Eqbal Al
      Yousuf                           
      

               

              Title:
      President                                          
      

            


    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
A

     

    DEFINITIONS

     

    “Business Day” means
any day other than a Saturday, Sunday or other day on which banks are authorized
or required by law to be closed in New York City, New York.

     

    “Closing Date” means
July 30, 2008.

     

    “Deed of Trust” means
that certain Deed of Trust, dated July 30, 2008, granted by Zap, in favor of
Fidelity National Title Company, as trustee, for the benefit of Al Yousuf
LLC.

     

    “Excluded Taxes”
means, with respect to the Holder, Taxes which are both (a) imposed by the
jurisdiction in which the Holder is organized, a taxing authority thereof or
therein or by a taxing authority of any other jurisdiction as a result of the
Holder’s doing business or maintaining an office in such jurisdiction (other
than such Taxes that would not have been imposed but for (i) the Holder having
executed, or enforced, a Loan Document or (ii) any of the transactions
contemplated herein or in the other Loan Documents) and also (b) imposed on,
based on or measured by net income, capital or net worth of the Holder (other
than Taxes that are, or are in the nature of, sales, use, rental, property or
value added or similar taxes).

     

    “Interest Accrual
Period” means, initially, the period commencing on the date that funds
are delivered by Holder to the escrow company, Fidelity National Title Company,
and continuing to and including the calendar day preceding the next Payment
Date, and thereafter each period running from and including a Payment Date to
and including the calendar day preceding the next Payment Date during the term
of the Loan.

     

    “LIBOR” means, with
respect to any Interest Accrual Period, the rate per annum (rounded upwards, if
necessary, to the nearest one-sixteenth (1/16th) of one percent (1%)) reported
on the day that is two (2) LIBOR Business Days prior to the thirtieth (30th) day
of the month during which the applicable Interest Accrual Period begins by the
British Bankers Association as the non-reserve adjusted London Interbank Offered
Rate for U.S. dollar deposits having a one (1) month term and in an amount of
$1,000,000.00 or more (all as determined by Holder in its sole but good faith
discretion). In the event that (i) more than one such rate is provided, the
average of such rates shall apply, or (ii) no such rate is published, then LIBOR
shall be determined from such comparable financial reporting company as Holder
in its sole but good faith discretion shall determine. LIBOR for any Interest
Accrual Period shall be adjusted from time to time by increasing the rate
thereof to compensate Holder for any aggregate reserve requirements (including,
without limitation, all basic, supplemental, marginal and other reserve
requirements and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during any Interest Accrual Period)
which are required to be maintained by Holder with respect to “Eurocurrency
Liabilities” (as presently defined in Regulation D of the Board of Governors of
the Federal Reserve System) of the same term under Regulation D, or any other
regulations of a governmental authority having jurisdiction over Holder of
similar effect. The

    
 

    
 

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    establishment
of LIBOR by Holder and the Holder’s calculation of the rate of interest
applicable to this Note shall, in the absence of manifest error, be final and
binding.

     

    “LIBOR Business Day”
means any day on which banks are open for dealing in foreign currency and
exchange in London, England.

     

    “Loan Documents”
means (i) the Promissory Note, (ii) the Deed of Trust, and (iii) the UCC-1
financing statements to be filed against Zap, as debtor.

     

    “Maturity Date” means
February 28, 2010.

     

    “Mortgaged Property”
means that property described on Exhibit A to the Deed of Trust.

     

    “Taxes” means all
income, gross receipts, rental, franchise, excise, occupational, capital, value
added, sales, use, ad valorem (real and personal), property (real and personal)
and excise taxes, fees, levies, imposts, charges or withholdings of any nature
whatsoever, together with any assessments, penalties, fines, additions to tax
and interest thereon, howsoever imposed (whether imposed upon the Maker, the
Holder, or all or any portion of the Mortgaged Property or otherwise), by any
governmental authority or other taxing authority in the United States or by any
foreign government, foreign governmental subdivision or other foreign or
international taxing authority.

     

    “U.S. Governmental
Authority” means any federal, state or local government, authority,
agency, central bank, quasi-governmental authority, court or other body or
entity, and any arbitrator with authority to bind a party at
law.